Subject: [/] Brexit update + Trade Idea [I] From: Martin Zeman <[email protected]> Date: Thu, 07 Jun 2018 09:53:57 -0400 To: "Paul Barrett ( Cc: Gaurang Chadha <[email protected]>, Xavier Avila <[email protected]>, Davide-A Sferrazza <[email protected]>, Stewart Oldfield Liam Osullivan <[email protected]> Morning Paul, Our GM strategist George Saravelos published an update on Brexit this morning arguing the direction of travel is towards a very "soft" Brexit. As such, it makes sense to look at upside GBPUSD and downside EURGBP plays. George argues for staying long GBP. We also discuss long GBP in our updated FX Blueprint (published by GM research) from a few days ago here: https://research.db.com/Research/Article?rid=caOaleb8-b342-4d9c-a35f- f63f1559f82e-604&kid=RP0001&documentType=R Rationale (George Saravelos): 1. THE BACKSTOP This is the UK's counter-proposal to resolving the Northern Irish border issue. It is the most important one because Northern Ireland is the sticking point to getting the overall Withdrawal Agreement. Theresa May said the UK government would never sign up to Northern Ireland staying in the customs union so her counter-proposal is for all of the UK to stay in until an alternative solution has been found. This is defacto extending the UK's membership of the EU to beyond the two-year transition. Reports overnight suggest it is causing very large tension within cabinet with the sub- committee due to meet again today. Publication of the White Paper would be very bullish because it means the cabinet Brexiteers have signed off. Delay would be more negative but so long as there is no resignation it would not change the direction of travel. Note that the EU has its own objections on the proposal (there cannot be a fixed date to the backstop), but the UK has been moving towards the EU position (as with everything else). (B) THE LORDS AMENDMENTS EFTA01435227